The Federal Government has announced a new round of consultation on proposed measures to further strengthen laws on unfair contract terms. The announcement follows a 2016-2018 review which found that while protections for small business had improved, industry confusion around implementation has persisted, there is a lack of regulatory guidance and the deterrence effect has been limited. As it stands, unfair contract terms can be voided but the Australian Competition and Consumer Commission (ACCC) cannot seek pecuniary penalties for that offence alone.

In response to the review findings, the government will now move to consider the following substantive changes (in additional to an array of technical amendments):

  • introducing civil penalties for breaches of the unfair contracts regime, and rendering the conduct illegal
  • changing the concept of a “small business” to one that employs fewer than 100 persons at the time of the contract or had an annual turnover less than $10 million
  • removing the value threshold for small business contracts, thereby expanding the application of the regime
  • clarifying the definition of a “standard form contract”, a key concept upon which the application of the small business regime relies
  • expanding the category of agreements caught by the regime to include government contracts
  • a possible exemption of ‘minimum standards’ prescribed by state and territory laws.

The proposal aligns with the ACCC’s ongoing focus on unfair contracts and repeated calls by its Chairman Rod Sims for increased powers and penalties to encourage change in business behaviours.

If adopted, these changes would follow standing commitments to extend the current regime to insurance contracts, and an earlier announcement by the Federal Labor Party that it would outlaw unfair contract terms and increase fines. The consultation will also consider whether the proposed changes could be extended to consumer and insurance contracting.